If you’re one of the millions of Americans hoping to buy a home soon, you are probably searching for ways to save for your down payment. A more substantial down payment can save you money in several ways:
- Lower interest rates and access to better loan programs.
- Lower monthly payments.
- Less interest over the life of the loan.
- No need for costly private mortgage insurance.
The more money you save now, the less you’ll spend over time.
But many first-time buyers find it difficult to save. In a time of high living costs and wages that aren’t keeping up, how can you save money towards a down payment? Here are some creative ways to get you to your goal faster.
1. Create a budget
Many people don’t know exactly where their money goes every month. By creating a budget – and sticking to it – you can identify and eliminate unnecessary spending.
A quick Google search reveals dozens of free budgeting apps. One of the most popular and most user-friendly is the EveryDollar app (not an affiliate – just a great program!), created by financial guru Dave Ramsey and team. It’s easy to set up a monthly budget, eliminate needless spending, and set saving goals.
2. Pay off debt
Want a lower interest rate on your mortgage? Pay off debt! High debt-to-income ratios will kill your credit score, and you’ll have a higher interest mortgage as a result. Plus, once you’re free of debt payments, you’ll be able to build your nest egg more quickly.
3. Meal plan and cook at home
Eating out is expensive. If you’re saving for a home purchase, you should stop frequenting restaurants. According to the Bureau of Labor Statistics, the average American spends about $3,000 annually on dining out. Imagine what $3,000 could do if put towards your down payment instead!
Cooking at home takes time, effort, and discipline, but it’s worth it in the long run. Need help getting started? Here are a few suggestions:
- Look up cheap, healthy meals that are easy to prepare, taste delicious, and are inexpensive.
- Meal plan and prep on the weekends. Dining out feels less tempting when a weeknight home-cooked meal feels effortless.
- Use coupons wisely to lower your monthly grocery bills even more.
- Check weekly ads and compare prices to get the best deal on groceries.
Every penny you save on food should go directly to your down payment savings account.
4. Pick up extra work
The best way to save more is to earn more. Pick up extra shifts at work or find a part-time job. You don’t need to work 60 hours a week forever, but increasing your income now will get you closer to your goal faster.
5. Find free entertainment
Once you establish a budget, identify how much you’re spending on recreation every month. Entertainment spending isn’t bad, but saving money towards the purchase of your home is better. There are plenty of free options in nearly every city. Get creative, and get into your home faster!
6. Sell your stuff
Look around you: do you really need everything you own? Turn your unwanted items into some cold hard cash by selling them online or having a yard sale. It’s a win-win situation: you’ll have more money towards your down payment, and fewer items to move once you buy your house!
7. Cut back on other saving
If you’re currently investing in a 401K, IRA, or another retirement program, consider temporarily stopping your contributions. Instead, use that money towards a down payment.
8. Eliminate the nickel-and-dimes
Small charges can add up every month. Take a look at your monthly spending and see if you can cut back on these minor charges:
- ATM fees. Start using ATMs that offer free withdrawals.
- Monthly subscription services. Are you really using each service you pay for each month? Even a dollar here or there can add up to significant savings over time.
- Can you save a few bucks every month by switching to an average-usage plan? Does your city offer price reductions for green energy usage? Can you turn down the thermostat a few degrees if it means purchasing a home sooner?
- Health, homeowners, and auto insurance. Shop around for lower prices, raise your deductible, or switch providers and save!
Decreased spending in the short-term will pay off in the long-term. Think of how great it will feel when that hard work pays off, and you can put your feet up in your very own home!
Want to learn more about available financing options for first-time homebuyers? Check out our article here!
Becca Stewart is a freelance writer and editor, military spouse, and real estate owner and investor. You can learn more about her at her website, writebecca.com.